Second class mail will reportedly be cut to just three days a week when billionaire Daniel Kretinski completes his £3.5bn takeover of Royal Mail.
A businessman nicknamed the “Czech Sphinx” for his inscrutable nature is planning to bring Britain’s 500-year-old postal service into full foreign ownership for the first time.
But the business tycoon, who also owns a 10 per cent stake in Sainsbury’s and almost a third of West Ham Football Club, may already be considering plans to cut the current Royal Mail service.
At present, Royal Mail must deliver first and second class mail to all addresses in Britain six days a week under its universal service obligations.
However, Kretinski, 48, reportedly wants to keep the six-day service for first-class mail only – which would attract a higher premium, according to The Sunday Times.
Moving second class mail to every other day is thought to save the company £300 million a year.
But the change must be signed off by watchdog Ofcom.
Mr Kretinski’s EP Group offered parent company Royal Mail International Distributions Services (IDS) Ltd 370p a share, down from 320p a share last month.
But Mr Kretinski’s bid comes at a time of extreme duress for Royal Mail, which has faced a backlash over suggestions it could deliver non-first class letters every other day to save money.
The proposal also calls for the elimination of 1,000 positions through voluntary redundancies.
This is a rejection of the previous proposal to completely abolish Saturday deliveries, which was met with sharp criticism by government and opposition MPs.
IDS is “keen” to accept the deal – provided EP Group agrees to a number of requirements that protect Royal Mail’s 500-year-old British heritage, such as keeping its headquarters and taxation in the UK.
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EP Group also says it will protect the rights of employees and continue to recognize the unions representing Royal Mail and GLS staff.
The 508-year-old postal service was privatized in 2013, but has run into financial difficulties and suffered a slump in share prices.
Next week’s annual results for IDS, which also owns the lucrative parcels business in Europe, are expected to reveal Royal Mail’s dire performance, with the company losing almost £1m a day.
Vince Cable – the Liberal Democrat politician who led the privatization – this week defended his actions, which at the time accused the government of selling the company on the cheap.
He said his recent stock performance supported the decision to sell at the price it was made. Mr Kretinski’s offer is just 40p above the 2013 share price of 330p.
“This is a company with very deep problems stemming from the decline of its core business [letters]” Mr Cable told the Mail.
Kretinski amassed his £7.3 billion fortune across a range of industries, but made much of it by buying junk coal, gas and other fossil fuel assets in the fight against the green transition.
The businessman must formalize the takeover of IDS by May 29.
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The Post Office says a peak of 20 billion letters sent in 2004/05 fell to seven billion last year and is expected to continue to fall, despite the number of addresses in Britain increasing by four million for the same period.
As a result, postal workers are delivering fewer letters to more addresses – an unsustainable model in its current form, Royal Mail says.
It claims the cost of meeting the Universal Service Obligation – the legal requirement to deliver mail six days a week – is £2m a day.
Royal Mail’s precarious financial position has not been improved by workers walking off the job several times between May 2022 and July 2023 amid a row over proposed pay rises at the height of the cost of living crisis.
Postal workers have had their wages frozen in 2021 and have been offered a two per cent rise plus a one-off payment of £250 – which the union has refused to accept from the CWU amid inflation rates of around nine per cent.
This led to the infamous images of cage after cage of undelivered mail lying outside postal depots across the country, and eventually Royal Mail persuaded the unions to back a 10 per cent pay rise and a £500 lump sum payment.
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However, the service has since cut about 10,000 jobs – with 6,000 laid off and thousands of other workers who have not been replaced since leaving.
With rising costs and competition from other couriers such as DPD, Yodel, Evri and Whistl eating away at the customer base, Royal Mail reported a loss of £1.044 billion in the year to March 2023.
Last year’s results are due to be published soon, but results for the half year to September show an operating loss of £383m, compared with £278m last year.
This does not include the period when Ofcom fined Royal Mail £5.6m for failing to meet delivery targets.
Only IDS’s international transport arm, Amsterdam-based GLS, is turning a profit, helping to offset the woes of the British business.
Kretinski already owns part of Europe’s postal service, the Netherlands’ PostNL – prompting speculation he may try to merge the two.
He also has stakes in several British companies – and is said to be something of an Anglophile with a keen interest in Britain and its history.
Much of Kretinski’s wealth comes from his control of energy giant EPH, which has power stations in Devon, Lincolnshire, North Yorkshire and Northumberland.
A sports fan, he has been chairman of his boyhood club, 37-time Czech champions Sparta Prague, since 2004 and owns 27 per cent of West Ham.
He owns a stake in the French publication Elle and previously owned part of Le Monde. The billionaire also studied the application for the Telegraph.
He and his girlfriend, Anna Kellnerova, an heiress and horse-racing champion, are one of the richest couples in the world.
At 27, she is one of four children of Peter Kellner, who was the richest man in the Czech Republic until he died in a helicopter crash in Alaska in 2021 at the age of 56.
But it remains to be seen whether Kretinski is a friend or a foe – at a time when the Royal Mail’s reputation is in tatters.
According to YouGov, less than half of Britons have a positive impression of the UK’s main postal service.
Former Ocado boss Simon Thompson stepped down as boss last year, leaving the company on the hunt for its fourth chief executive in four years.
And the deterioration of its reputation will not be helped by the increase in the cost of sending letters and parcels over the network, which has grown exponentially since privatization.
Last month, the price of a First Class stamp was raised to £1.35 and a Second Class stamp to 85p. Two years ago they cost 85p and 66p respectively.
In 2015, Mr Kretinski bought the 15-bedroom Heath Hall in Hampstead for £65m and once rented it out to Justin Bieber for £27,000 a week while on a UK tour.
The UK government said it was “monitoring these developments closely” and that it would “engage with the bidder at the appropriate time to explain our expectations for the future of Royal Mail”.
“Our priority is to ensure that Royal Mail customers receive the service they deserve… regardless of ownership,” it said on Wednesday.
But Chancellor Jeremy Hunt is wary of any foreign takeovers of British institutions following the crisis at Thames Water, which could yet be renationalised as investors refuse to put more money into the provider.
Thames, which has debts of £18bn, could be taken over if it can’t find short-term cash – but it wants to be allowed to increase its bills by 40 per cent, pay lower fines and still be able to pay dividends to shareholders .